Rubber Gains as Growth in China’s Output Boosts Demand Outlook

Dec. 1 (Bloomberg) -- Rubber climbed for a third day after
data showed faster-than-estimated manufacturing growth in China
in November, improving optimism that demand from the world’s
largest user will increase.

May-delivery rubber on the Tokyo Commodity Exchange gained
as much as 1 percent to 363.8 yen per kilogram ($4,351 a metric
ton) before settling at 363.5 yen. The most-active contract,
which reached a 30-year high of 383 yen on Nov. 11, rose 10
percent in November, the fifth monthly advance.

The Purchasing Managers’ Index rose to 55.2 from 54.7 in
October, China’s logistics federation said on its website today.
That was more than the 54.8 median estimate of 14 economists
surveyed by Bloomberg News.

“The PMI data shows that China economy is still growing,”
Ker Chung Yang, an investment analyst at Phillip Futures Pte.,
said by phone from Singapore. “It’s a bullish sign for rubber
as China is the largest car producer and rubber demand will
remain strong and supported.”

Futures in Shanghai advanced as much as 2.2 percent to
31,550 yuan ($4,699) a ton before closing at 31,160 yuan. The
price reached a record high of 38,920 yuan on Nov. 11.

Chinese policy makers are seeking to sustain the nation’s
expansion while taming the fastest inflation in 25 months.
Shanghai’s benchmark stock index yesterday completed its first
monthly loss since June on concern growth may falter because of
Premier Wen Jiabao’s campaign against rising prices.

India Imports

India, the fourth-biggest producer of natural rubber, may
allow imports of as much as 100,000 tons at a lower duty to meet
surging demand for tires as rising incomes boost car sales,
Trade Secretary Rahul Khullar said.

The finance ministry may make a decision after the end of
the current session of parliament which runs to Dec. 13, Khullar
said in an interview in New Delhi yesterday. The trade ministry
has recommended imports at a concessional rate for a maximum of
100,000 tons and tax changes on tire imports, he said. Rubber
imports are taxed at 20 percent.

Natural rubber prices in India reached a record last month
on concern that the low-output season in Southeast Asia will
worsen a deficit.

Consumption of natural rubber in India is expected to
increase 5 percent next year to 1 million tons, from an
estimated 5.2 percent growth this year at 952,000 tons,
according to Association of Natural Rubber Producing Countries.

Tight Supply

The cash price of natural rubber in Thailand was unchanged
at 131.55 baht ($4.37) per kilogram today. Auctioned prices of
ribbed smoked sheets gained 0.5 percent today to 124.09 baht,
boosted by persistent demand from both local and overseas buyers
amid a supply shortage, according to the Rubber Research
Institute of Thailand.

Wet weather in southern Thailand continues to cut supply,
boosting prices, the institute said. The south accounts for
about 80 percent of production.

Supply from the Association of Natural Rubber Producing
Countries, which accounts for about 92 percent of global output,
may drop 3.8 percent in the three months to Dec. 31 as rains
have disrupted tapping in Thailand, the group said on Nov. 25.

Output from Thailand is estimated to tumble by 28 percent
during October-to-December period, which will lower production
this year by 1.4 percent to 3.12 million tons, the group said.